In 1997, the Canadian government outlawed the gasoline additive MMT, which was produced by the US-based Ethyl Corporation, due to potential health concerns. In response, Ethyl brought its objections to the international arbitration panel under the Investor-State Dispute Settlement system, (ISDS). The corporation argued that the law banning this additive was ‘tantamount to expropriation’ and, under NAFTA, was awarded $13 million in damages from the Canadian government. This ruling effectively nullified the Canadian people’s right to self-governance, and prioritized corporate profits over public health.
The Investor-State Dispute Settlement system is a key component of the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP). It is a powerful tool for corporations and their legal teams, allowing them to bypass judicial systems and receive ‘get out of jail free’ cards for corporate crimes. This system has been labelled the ‘judicial-industrial complex’s wet dream’, as it serves to entrench a new form of corporate feudalism.
What is ISDS?
Under Bill Clinton, NAFTA led to the creation of ISDS. NAFTA’s Chapter 11 designates ISDS as the mechanism for giving foreign investors “legal certainty.” The genuine “rule of law” was sought to be subverted in what foreign investors and businesses viewed as “unstable nations.” Democracies appear to be viewed as “unstable.”
The dangers of corporate investment didn’t satisfy these overseas firms. A “stacked deck” was what they demanded. The international arbitration tribunal was created along with the semantic device “legal certainty.” In these arbitration tribunals, there are no rights until the panel specifically states otherwise. ISDS offers legal protection for vast corporate thievery through covert arbitration courts that some have referred to as a “legal mafia.” As a result, NAFTA’s bastard offspring, ISDS, was born.
How ISDS works
International corporations have been granted unprecedented legal power through Investor-State Dispute Settlement (ISDS) agreements. These agreements allow corporations to sue governments over alleged profits loss, real or imagined, and even for future profits loss. The proceedings are overseen by three appointed corporate attorneys, who act as judge, jury, and executioner, and the taxpayer is left to foot the bill for any damages awarded.
The Trans-Pacific Partnership (TPP) has sparked intense debate between President Obama and his corporate allies, and the political left, over the surrender of national sovereignty to these arbitration lawyers. Leaked drafts of the TPP suggest that it incentivizes offshoring of jobs, while also prohibiting the regulation of finance capital, such as banning derivatives, currency manipulation, and other so-called ‘financial weapons of mass destruction.’ It also strikes down property rights to public natural resources in favor of international standards, which would be determined by the unelected international tribunal in secret proceedings.
President Obama has claimed that the TPP includes protections for labor, environmental and human rights, but the nature of ISDS renders these claims impotent. Any area of law, from environmental regulations to civil liberties, is subject to lawsuit and arbitration, and any statute deemed unfavorable to corporations can be challenged. The implications of these agreements are far-reaching, and the public must be made aware of the dangers of ‘shock and awe’ economic and legal globalization.
EU think tanks expose ISDS as fraud
In 2012, the Corporate Europe Observatory and the Transnational Institute published a major study titled “Profiting from Injustice: how law firms, arbitrators and financiers are fuelling an investment arbitration boom”. The study highlighted the prevalence of Investment Arbitration clauses in trade agreements, which replace legitimate courts with panels of self-appointed investment arbitrators, granting them the undemocratic power of kings.
Furthermore, corporations have been granted exclusive rights to sue states at secretive international tribunals for action deemed to unfairly affect investor profits. This process, which is conducted by attorneys from the legal corporate elite, has been dubbed the “Legal Mafia” and is more akin to the Dark Ages Star Chamber than the rule of law.
Challenging ISDS-facts don’t match arbitrator’s claims
Since the TPP documents were published online by WikiLeaks, there has been opposition against this “judicial-industrial complex.” The “Profiting from Injustice” report released 11 important conclusions outlining the ways that the ISDS procedure and the arbitration sector are contributing to and escalating injustice on a global scale. Here are the 11 main conclusions.
- “The number of investment arbitration cases and the amount of money at stake have increased over the past 20 years.”
- “Taxpayer-funded investment lawyers have made a bonanza profit thanks to the surge in arbitration.”
- “A tiny, closely-knit network of eminent law firms and arbitrators situated in either hemisphere dominates the international investment arbitration sector.”
- “Arbitrators frequently put the rights of private investors ahead of the general welfare, demonstrating an ingrained pro-corporate bias.”
- “Law firms with dedicated arbitration divisions look for every chance to sue nations, pushing lawsuits against crisis-ridden governments.”
- “Despite evidence to the contrary, investment lawyers—including eminent arbitrators—have aggressively marketed investment arbitration as a fundamental prerequisite for the recruitment of foreign investment.”
- “Investment attorneys have urged countries to ratify investment conventions with wording that increases the likelihood of legal action. They subsequently increased the number of cases by using these ambiguous treaty provisions.
- Arbitration law companies and elite arbitrators have actively lobbied against any improvements to the foreign investment framework, particularly in the US and the EU, using their positions of influence.”
- “An unjust investment regime is supported by a revolving door between investment lawyers and government policy-makers.”
- “Investment attorneys are firmly in control of the academic discourse on investment law and arbitration, providing a sizable portion of the academic works on the subject.”
- “Investment funds are helping to fund investor-state conflicts in exchange for a part in any awarded verdict or settlement, and the investment arbitration system is becoming increasingly interwoven with the speculative financial world.”
ISDS: The legal mafia, the ultimate con
The ‘legal mafia’ of investment arbitration is a system that has been met with incredulity by many. Juan Fernandez-Armesto, an arbitrator from Spain, was astounded that sovereign states had agreed to such a system, in which three private individuals are given the power to review, without restriction or appeal, all decisions of the government, courts and parliament. Peter Snyder, CEO of New Media Strategies, described it as ‘venture law’, with investors seeking out potential victims to sue for a windfall.
The system has been highly lucrative for corporate law firms and third-party speculators, with third-party funding of disputes commonplace. As one arbitrator put it, the aim is to ‘take the legal system and turn it into a stock market’. It is clear that the ‘legal mafia’ of investment arbitration is a system that is ripe for reform.
President Obama’s many lies of omission on ISDS…
President Obama has come under fire for his claims regarding the Trans-Pacific Partnership (TPP) and its Investor-State Dispute Settlement (ISDS) provisions. He has asserted that the TPP will not undermine US regulations on food safety, worker safety, or financial regulations, and that it will help to level the playing field for US workers and businesses. However, critics have raised concerns that the ISDS procedure could create a litigious environment where governments are drained of taxpayer funds through unlimited damages paid to international corporations.
White House blogger Jeff Ziest has responded to these concerns, claiming that ISDS does not and cannot require countries to change any law or regulation. While this is true, ISDS also fails to forbid corporate interference with any sovereign nation’s rights to decide its own fate. The risk of corporate profits loss, even without proof, serves as grounds to rob the public coffers.
President Obama has also sought to guarantee that the TPP will bring hundreds of millions of people under enforceable labor standards and protect endangered wildlife. However, these standards could be undermined by corporate attorneys suing for projected ‘future profits losses’ under ISDS.
In addition, President Obama has been accused of denying Congress the right to read and review the TPP. He has responded that members of Congress may view the text of the agreement, but he has failed to mention that they are prohibited by law from discussing any part of the TPP with the public.
As such, President Obama’s claims regarding the TPP and ISDS have been met with skepticism. Critics have raised concerns that the agreement could undermine US regulations and lead to corporate interference with national sovereignty. The secretive nature of the TPP has only served to fuel these concerns.
Oxford professor calls out ISDS as ‘post-law’ not ‘rule of law’
Colin Crouch, Professor Emeritus of Oxford University and Warwick Business School, has shed light on the true purpose of the Investor-State Dispute Settlement (ISDS) process used in the Transatlantic Trade and Investment Partnership (TTIP) and the US Trans-Pacific Partnership (TPP). In his book, Post Democracy, Crouch argues that the removal of most tariff barriers through global agreements has left non-tariff barriers as the main remaining obstacles to international trade. He warns that these regulations, which are in place to protect health, labour rights and public goods, are in danger of being undermined by the ISDS process. Crouch also notes that the arbitration panels used in this process are made up of corporate lawyers, rather than judges, and calls it “post-law” rather than post-democracy.
UN expert says ISDS violates international human rights law..
Alfred de Zayas, the United Nations’ Independent Expert on the promotion of a democratic and equitable international order, has raised serious concerns about the lack of accountability and transparency of international investment agreements such as Investor-State Dispute Settlement (ISDS). He has highlighted the potential for ISDS to allow corporations to challenge domestic laws through frivolous lawsuits, as well as the potential for conflicts of interest due to corporate attorneys switching sides as plaintiffs, defendants and/or arbitrators.
De Zayas has argued that ISDS violates international human rights law under article 14 of the International Covenant on Civil and Political Rights, which mandates that lawsuits should be adjudicated by independent tribunals. He has also highlighted the UN Charter, which states that free trade and investment agreements must honor national sovereignty and human rights. Quoting de Zayas, these agreements must not “lead to a violation, erosion of or retrogression in human rights protection or compromise State sovereignty and the State’s fundamental obligation to ensure the human rights and well-being of all persons living under its jurisdiction.” Agreements or decisions that violate international human rights law, he argues, are null and void.
U.S. Congressman Alan Grayson (D-FL) calls out ISDS as ‘justice for sale’…
In a phone conversation, US Congressman Alan Grayson described this conflict of interest more plainly.
“They” (TPP international tribunal/ISDS) substitute an alternative system that is structured to benefit transnational businesses for our five-step established legal processes for claims against the government.
“TPP establishes…procedures that effectively abrogate our democracy,” the statement reads.
Justice is “it (ISDS)..for sale.”
Conclusion
Investors-state dispute settlement (ISDS) has been a controversial topic since its introduction. This system grants corporations the right to sue governments if they feel their profits are being threatened. Critics of ISDS argue that it undermines democracy and the rule of law, granting privilege to the rich and powerful.
Since the dawn of democracy, from Magna Carta to the US Bill of Rights, the right to self-govern has been a fundamental principle. The rule of law must remain unbiased and equal for all. ISDS, however, represents a transition from the rule of law to a ‘post-law’ rule, allowing corporate attorneys and legislators to turn a blind eye to justice.
The legitimacy of any government to sign away or strip its citizens of their sovereign rights is being questioned. This includes the right to self-govern through direct democracy. Critics of ISDS argue that it is a crime against humanity, and those responsible should be held criminally accountable.
The silence of Hillary Clinton on this issue has been noted. As a former First Lady, her husband’s NAFTA treaty established the arbitration tribunal which is now the subject of much debate. How long will she maintain her silence?
